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Mergers and capital flight in unionised oligopolies: Is there scope for a 'national champion' policy?

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Author Info

  • Lommerud, Kjell Erik

    ()
    (Department of Economics, University of Bergen)

  • Meland, Frode

    ()
    (Department of Economics, University of Bergen)

  • Straume, Odd Rune

    ()
    (University of Minho (NIPE), Portugal; and University of Bergen (Health Economics Bergen))

Abstract

Many policy makers seem to prefer domestic alternatives to cross-broder mergers. Can such sentiments make sense? We contruct a model where cross-border mergers drive down union-set wages, where domestic mergers have larger non-labour cost synergies than international ones, and where policy evaluators care more about workers than capital owners. Apparently, the stage is set for national champion policies to be sensible. However, we also introduce the possibility of capital ?ight in the sense that a domestic ?rm can physically move its production out of the country. Restrictive cross-border merger policies can then seriously back?re, since they do not necessarily bring about a domestic merger - but capital flight instead.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 02/08.

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Length: 28 pages
Date of creation: 23 Mar 2008
Date of revision:
Handle: RePEc:hhs:bergec:2008_002

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Keywords: Cross-border merger; national champions; greenfield FDI; trade unions;

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References

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Citations

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Cited by:
  1. Fernando Alexandre & Miguel Portela & Carla Sá, 2008. "Admission conditions and graduates' employability," NIPE Working Papers 16/2008, NIPE - Universidade do Minho.
  2. Paulo Bastos & Natália P. Monteiro, 2011. "Managers and Wage Policies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(4), pages 957-984, December.
  3. Bas, Maria & Carluccio, Juan, 2010. "Wage Bargaining and the Boundaries of the Multinational Firm," CEPR Discussion Papers 7867, C.E.P.R. Discussion Papers.
  4. Maria Bas & Juan Carluccio, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
  5. Kjell Lommerud & Trond Olsen & Odd Straume, 2010. "Company Taxation and Merger Incentives in International Oligopoly: on International Policy Coordination with Strategic Trade," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 161-186, June.
  6. Domenico Buccella, 2011. "Labor unions and economic integration: A review," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 25-89, January-D.

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